Ukraine's Finance Ministry sold 20-month local Eurobonds for USD 234.3 mln at its weekly bond auction held on June 12. MinFin also placed 3M, 6M, 10M, 1Y and 3Y UAH-denominated bonds at a total amount of UAH 1.2 bln, bringing total auction receipts to UAH 7.4 bln (in the equivalent).

The government satisfied 27 out of 30 bids for 20-month local Eurobonds with a weighted average interest rate of 5.62%. Recall, 21-month local Eurobonds were placed at 5.60% while 18-month local Eurobonds yielded 5.32% at the auction held on May 22.

Two-thirds of hryvnia auction receipts were raised by the placement of 3M and 6M bonds. MinFin satisfied seven of eight bids for 3M bonds for UAH 485 mln at 17.44%, the same interest rate as one week ago. Three auction participants bought 6M bonds for UAH 463 mln at 17.25% (vs. 17.23% on May 29).

The interest rates for longer UAH-denominated bonds increased amid pretty weak demand. In particular, the interest rate for 3Y bonds, which were bought by six bidders for UAH 144 mln, inched up to 16.14% from 16.10% three weeks ago. One-year bonds were placed at 17.25% (vs 17.00% previously) bringing UAH 90 mln to three bidders. The interest rate for 10M bonds was 17.30%.

Evgeniya Akhtyrko: Local bond buyers continue to prefer foreign currency-denominated local bonds over UAH-denominated ones. Meanwhile, the government, which has had a shortage of foreign currency inflow, has had to concede to buyers higher interest rates for local Eurobonds in order to keep its gross international reserves at an acceptable level.

We expect the government to attract another USD 200-300 mln from local Eurobond placements in June. The higher interest rates for longer UAH-denominated local bonds likely points to a government attempt to shift market demand away from 3M and 6M bonds, which enjoy the most demand currently.